Market Liquidity & Volatility

To beginner traders markets liquidity and volatility could be threatening terms. Traders must learn and practice these terms before stepping foot in to real time financial markets. These terms no doubt are active part of trading regime. The term liquidity
means how rapidly, effortlessly and proficiently something can be bought or sold in the markets. While, volatility is the velocity at which a market’s price changes over a particular period of time. Volatility of markets is directly influenced with news and events. Liquidity can also affect a market’s level of instability i.e. the insufficient buying and selling of particular asset may fluctuate the market more rapidly. Financial markets are highly liquid and volatile in nature. If liquidity determines the depth of the market, volatility determines the pace at which the changes happen. Often in festive season late November and early January market volume dries up and it tends to indicate ‘thin market’ or an illiquid market. The technical analysis are reliable when the markets are more liquid, but when the candles are wobbles it reflects high volatile nature of markets.

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